Does Filing Bankruptcy Affect Your Credit?

How Filing Bankruptcy Will Impact Your Credit Score

If you are considering filing bankruptcy, you likely have a lot on your mind. One of the questions is likely how bankruptcy will impact your credit. Fear of being unable to qualify for a future home loan or other forms of credit is the number one hesitation of consumers considering bankruptcy. The hard truth is that bankruptcy will impact your credit, but you can recover and qualify for the life you want.

Immediate Credit Impact

The good news is that a bankruptcy will either clear your debts or set you up on a reasonable repayment plan, allowing you to get back on your feet financially. The bad news is that it will not result in an immediate boost or change in your credit score. In fact, late payments and other credit issues related to debts discharged in bankruptcy can still appear on your credit report up to seven years after the initial reporting date. Additionally, any debts not taken care of by the bankruptcy will continue to impact your score.

The immediate credit impact is not all bad, though. Bankruptcy will lower your debt ratio and will typically result in a slight boost to your score, even with the negative mark of the bankruptcy itself. This will take time to show up on your credit report, though, so be patient. The manageable payments you are left with after bankruptcy should also help, as you will begin to build a history of making on-time payments. Still, you’ll need to put in some work to continue to raise your score, as the effects of bankruptcy alone will not repair your credit fully.

Recovering Your Credit

Your bankruptcy filing will stay on your credit for seven years in the case of a Chapter 13 filing, or 10 years in a Chapter 7 bankruptcy, but you can rebuild an excellent credit score. Your score can increase even before the bankruptcy falls off of your credit report by simply making wise credit moves.

● Make payments on all accounts on time

● Minimize new debt accounts

● Shop around for the best interest rate on new debts

● Check your credit report and dispute inaccurate information

● Be skeptical of the offers you will get following your bankruptcy closing

You should find the credit counseling and financial management counseling required by law to be helpful in restoring your credit, as well. Make use of the information learned in those sessions. Finally, it is important to note that the bankruptcy’s impact on your credit score will decrease over time, even before it falls off of your credit report. So time, coupled with smart financial moves, is the key to getting your credit score up. It can be frustrating to work and wait, but the life you want is possible.

Contact an Experienced Bankruptcy Attorney

The attorneys at Cornwell Law Firm can walk you through bankruptcy and the impact it will have on your life moving forward. We can even help you to discern between legitimate, helpful offers to rebuild your credit and predatory offers that are likely to do more harm than good. Contact us today to schedule a free consultation.